Mehta says all this has caused the budgets of films to increase by 30-40%. "With service tax now payable on all services, and without any offset against theatrical and satellite distribution, the costs are only likely to go up further." To complicate matters for producers, marketing costs have shot up sharply.

Sanjay Bhandari, financier and consultant to movies such as Don, Jab We Met, Singham and Bodyguard, says in the old days, there was no such thing as marketing. "Today, it is vital to the success of a movie. It's similar to launching a product but more difficult because the shelf life of the product [movie] is only a week."

Aggressive marketing has become the norm in Hindi movies, evoking similarities with the practice in Hollywood. Phil Contrino, editor, boxoffice.com, says if a Hollywood studio is spending a lot to make a movie, it is guaranteed to spend a lot marketing it. "They want to protect their investment."

Ra.One is a shining example of this strategy in Bollywood. The film enjoyed the longest and most elaborate marketing campaigns in the history of Indian cinema. Today, even medium-budget films are increasingly turning lavish to gain visibility. Selling a movie has amplified film budgets, but the commercial success ratio of films remains roughly the same at 15-17%, according to KPMG. "The producer's position is still precarious," says Gada.

Some Solace

Mercifully, new revenue streams have opened for filmmakers. Cable and satellite rights, for one, are turning to be a cash cow. Last year, four films earned more than Rs 30 crore from selling satellite rights.

Producers of big-budget films are also able to recover up to 80% of costs even before release by selling the movie to distributors. Agent Vinod, for instance, was a box-office disaster but as it was sold even before release, the producers were able to cushion the financial impact. Marketing partnerships with foreign tourism boards (Zindagi Na Milega Dobara tied up with Spanish tourist authorities) can also offset costs.

Yet, the fortunes of all movies are still dependent on box-office results. More than 70% of earnings of an average Indian movie still comes from the domestic box office (See Revenue Streams), says Jehil Thakkar, Head of Media and Entertainment, KPMG India.

Some production houses are taking a fresh look at strategies. Vikram Malhotra, CEO, Viacom 18 Motion Pictures, says due to the steep increase in A-list projects, the company is reassessing its focus and core competency on building high content quality films in the medium range (up to Rs 40 crore). "Growth in revenues has been strong, but it will be in the interest of the industry if talent costs do not become irrational." What Next?

But checking a lead actor's fees is easier said than done — not when Rs 100 crore is playing in the minds of every stakeholder. But even Rs 100 crore might not be a true measure of the box office potential of Bollywood. Ormax's Kapoor says if a film does a business of Rs 100 crore at the box office at an average ticket price of Rs 100, only 1.33 crore people would have watched the film. "That is only about 1% of our population. The potential of a big-star film is at least Rs 300 crore."

This argument gains credence if one accounts for the severely under-screened market that India is (See Exhibition under How The Movie Business Works). Around 10 films jostle for screen space every Friday as more and more people flock to the theatres. Never mind that quality is clearly missing in the ledger books. In Bollywood, they would call it "Ek Tha Miracle".